M/s K.C. Land & Finance Ltd., Nawanshahr V. The Assistant Commissioner of Income Tax, Jalandhar

MA 55/ASR/2016

• Counselvise Citation: [2017] 124 COUNSELVISE.COM (IT) 5297 (ITAT-AMRITSAR)
• Duration Of Justice: 6 month(s) 8 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 21-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 12-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: BHAGAT; RAJINDER CHOPRA
• Keywords: Capital asset; Additional evidence; Question of law; Reasonable cause; Assessment record
• Section: 40A(3); 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER (CAMP AT JALANDHAR) M.A NO.5 5(ASR)/2016 ARISING OUT O F ITA NO.22(ASR)/2016 ASSESSMENT YEAR: 2009-10 I.T.A NO .22(ASR)/2015 ASSESSMENT YEAR: 2009-10 M/S K.C. LAND & FINANCE LTD, CHANDIGARH ROAD, NAWANSHAHAR. PAN:AACCK-2131R VS. ASST. CIT, CENTRAL CIRCLE-II, NEW JAWAHAR NAGAR, JALANDHAR. (APPELLANT) (RESPONDENT) I.T.A NO.3(A SR)/2015 ASSESSMENT YEARS: 2007-08 DY. CIT, CENTRAL CIRCLE-II, NEW JAWAHAR NAGAR, JALANDHAR. VS. M/S K.C. LAND & FINANCE LTD., CHANDIGARH ROAD, NAWANSHAHAR. PAN:AACCK-2131R (APPELLANT) (RESPONDENT) APPELLANT BY: SH. M.R.BHAGAT & RAJINDER CHOPRA RESPONDENT BY: SMT. BALW INDER KAUR (DR DATE OF HEARING: 24.01.2017 DATE OF PRONOUNCEMEN T:21.02.2017 ORDER PER T. S. KAPOOR (AM): THESE ARE CROSS APPEALS FILED BY ASSESSEE AS W ELL AS BY REVENUE AGAINST THE ORDER OF LD. CIT(A), JALANDHAR, DATED 28.10.201 4 FOR ASST. YEAR: 2009-10. M.A. NO.55(ASR)/2016 I TA NOS.22 & 03 (ASR)/2015 ASST. YEAR: 2009-10 2 2. THE GROUNDS OF APPEAL TAKEN BY ASSESSEE AS WELL AS BY REVENUE ARE REPRODUCED HEREIN BELOW. THE FOLLOWING GROUNDS TAKEN BY ASSESSEE AS UNDER: .1. THE APPELLANT ORDER IS ILLEGAL, PERVERSE, ARBITRARY TO THE EXTENT THAT DISALLOWANCE OF RS.1,16,02,500/- WAS CONFIRMED WITH OUT APPRECIATING FACT OF THE CASE AND LAW AND ALSO FOR DISMISSING GROUND NO.2 ON TECHNICAL ISSUE. 2. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTI ON OF THE A.O TO MAKE REFERENCE U/S 142(2) OF THE INCOME TAX ACT BECAUSE THERE WAS NO PENDENCY AND ACCOUNTS HAD NOT BEEN SEEN BY THE A.O. TO JUDGE THE COMPLEXITY AND NATURE OF ACCOUNTS OR INTEREST OF REVENUE. IT IS PRAYED ASSES SMENT ORDER MAY BE CANCELLED. 3. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN CONFIRMING ADDITION OF RS.1,16,02,500 WITHOUT APPRECIATING THE FACT THAT APPELLANT PURCHASED CAPITAL ASSET WHICH WAS CONVERTED IN STOCK IN TRADE AT SUBSEQUENT DATE AND ALL THE SELLERS HAD DECLARED BEFORE THE REGISTERING AUTHORI TY THAT PAYMENT WAS RECEIVED BY THEM IN ADVANCE AT PLACES WHICH WERE NOT SERVED BY BANKS AND IN SOME CASES ON SUNDAYS. (BANK HOLIDAY) 4. THE APPELLANT CRAVES LEAVE TO AMEND ANY GROUND ( S) OF APPEAL OR ADD ANY NEW GROUND(S) OF APPEAL BEFORE THE APPEAL IS FINALLY HE ARD. IT IS PRAYED THAT ADDITION MAY BE DELETED. WHEREAS THE FOLLOWING GROUNDS TAKEN BY REVENUE AS UNDER . 1. WHETHER LD. CIT(A) IS CORRECT IN LAW AND FACTS IN D ELETING THE ADDITION OF RS.85,50,009/- OUT OF TOTAL ADDITION MADE OF RS. 2,33,16,310/- BY ADMITTING THE ADDITIONAL EVIDENCE PRODUCED BY THE A SSESSEE WHEN THERE WAS NO REASONABLE CAUSE WHICH WERE NOT PRODUCED DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS AND ALSO DURING SPECIAL AUDI T. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT (A) WAS CORRECT IN FACT IN RESTRICTING THE ADDITION OF RS.1 ,16,2,500/- OUT OF RS.1,22,23,250/- MADE BY THE AO ON ACCOUNT, OF CASH PAYMENT FOR LAND PURCHASE. 3. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROU NDS OF APPEAL ON OR BEFORE IS HEARD AND DISPOSED OFF. 4. IT IS PRAYED THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-I, BE SET-ASIDE AND THAT OF THE AO BE RES TORED. 3. THE APPEAL OF THE ASSESSEE EARLIER WAS DISMISSED FOR NON PROSECUTION VIDE TRIBUNAL ORDER DT.26.05.2016 AGAINST WHICH ASSESSEE FILED MISCELLANEOUS M.A. NO.55(ASR)/2016 I TA NOS.22 & 03 (ASR)/2015 ASST. YEAR: 2009-10 3 APPLICATION FOR RECALLING OF THE SAID ORDER. THE AS SESSEE HAS ALSO FILED AFFIDAVIT OF THE ACCOUNTANT OF THE FIRM WHEREIN HE HAS NARRATED THE CIRCUMSTANCES UNDER WHICH THE HEARING COULD NOT BE ATTENDED. THE LD. A R SUBMITTED THAT A BUNCH OF APPEALS OF THE GROUP COMPANIES OF ASSESSEES WERE FI XED FOR HEARING ON THAT DATE AND THE ACCOUNTANT OF THE FIRM WHO ATTENDED THE PRO CEEDINGS GOT THE IMPRESSION THAT ALL THE APPEALS OF THE GROUP HAD BEEN ADJOURNE D WHEREAS THIS APPEAL WAS NOT ADJOURNED AND THEREFORE, THERE WAS A GENUINE RE ASON FOR NOT ATTENDING THE HEARING AND IT IS PRAYED THAT THE SAID TRIBUNAL ORD ER BE RECALLED FOR HEARING ON MERITS. 4. THE LD. DR HAD NO OBJECTION FOR RECALLING OF THE SAID ORDER AND THEREFORE, THE ORDER DATED 26.05.2016 OF THE TRIBUNAL IS RECAL LED AND LD. AR WAS ASKED TO PROCEED ON MERITS. 5. THE LD. AR, AT OUTSET, SUBMITTED THAT THE ASSESSEE HAS TAKEN THE LEGAL GROUNDS AS WELL AS GROUNDS ON MERITS FOR THE ADJUDI CATION OF BENCH, BUT HE SUBMITTED THAT HE WILL NOT BE PRESSING LEGAL GROUND S AND WILL BE ARGUING ONLY MERITS OF THE CASE. 6. BRIEFLY STATING THE FACTS OF THE CASE, THE LD. A R SUBMITTED THAT ASSESSEE WAS ENGAGED IN THE PURCHASE AND DEVELOPMENT OF PROP ERTY AND DURING THE YEAR IT HAD MADE PAYMENTS FOR PURCHASE OF LAND AND HAD MADE CERTAIN CASH PAYMENTS FOR PURCHASE OF SUCH LANDS. THE LD. AR SUBMITTED TH AT THE MERITS THE CASE OF THE ASSESSEE ARE SQUARELY COVERED BY THE ORDER OF HONB LE PUNJAB & HIGH COURT IN M.A. NO.55(ASR)/2016 I TA NOS.22 & 03 (ASR)/2015 ASST. YEAR: 2009-10 4 THE CASE OF SH. GURDAS GARG VS. CIT, ITA NO.413/2014 (P&H HIGH COURT) AND IN THIS RESPECT FILED A COPY OF THE ORDER OF THE HONB LE HIGH COURT. 7. THE LD. DR, ON THE OTHER HAND RELIED UPON THE OR DER OF AUTHORITIES BELOW AND SUBMITTED THAT LD. CIT(A) HAS RIGHTLY DISALLOWE D THE CASH PAYMENTS. HE SUBMITTED THAT LD. CIT(A) HAS EXTENSIVELY DISCUSSED THE ISSUE IN HIS ORDER. 8. AS REGARDS THE APPEAL FILED BY REVENUE, LD. D R SUBMITTED THAT BEFORE ASSESSING OFFICER VOUCHERS WERE NOT PRODUCED AND TH EREFORE, THE ACTION OF LD. CIT(A) IN NOT CONFRONTING THE SAID VOUCHERS TO THE ASSESSING OFFICER AND ALLOWING RELIEF TO THE TO THE ASSESSEE IS NOT JUSTIFIED. THE LD. DR FURTHER SUBMITTED THAT THE LD. CIT(A) HAS ALSO RESTRICTED THE DISALLOWANCE OF RS.1,22,23,250/- TO RS.1,16,02,500/- FOR MAKING CASH PAYMENTS FOR PURCH ASE OF LAND IS ALSO NOT JUSTIFIED. 9. THE LD. AR, ON THE OTHER HAND, SUBMITTED THA T COMPLETE BOOKS AND VOUCHERS WERE FURNISHED BEFORE THE ASSESSING OFFICE R. THE LD. AR IN THIS RESPECT INVITED OUR ATTENTION TO THE ORDER OF LD. CIT(A) AT PAGE 12, WHEREIN THE LD. CIT(A) HAS MENTIONED THAT AFTER VERIFICATION OF ORDER SHEE T EATERIES IN THE ASSESSMENT RECORD HE HAS HELD THAT LD. AR HAD ATTENDED THE PRO CEEDINGS AND HAD PRODUCED THE BOOKS OF ACCOUNTS AND THE CASE WAS DISCUSSED ON 16.08.2012 WITHOUT RECORDING ANY ISSUE REGARDING DISALLOWANCE U/S 40A( 3) OF THE ACT. M.A. NO.55(ASR)/2016 I TA NOS.22 & 03 (ASR)/2015 ASST. YEAR: 2009-10 5 THE LD. AR FURTHER SUBMITTED THAT THERE WAS NO PAYM ENT EXCEEDING RS.20,000/- IN CASH AND IT WAS ONLY BUNCHING OF VOUCHERS AND AC COUNTANT HAD PASSED CONSOLIDATED ENTRIES WHICH FACT HAS BEEN VERIFIED B Y LD. CIT(A) HIMSELF AND THEREFORE, IT WAS PRAYED THAT THE APPEAL FILED BY R EVENUE BE DISMISSED. 10. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE T HROUGH THE MATERIAL PLACED ON RECORD. FIRST OF ALL, WE TAKE UP THE APPEAL FILE D BY ASSESSEE. THE ONLY EFFECTIVE GROUND RAISED BY ASSESSEE IS THE CONFIRMATION OF AD DITION OFRS.1,16,02,500/- WHICH THE ASSESSING OFFICER HAD MADE FOR MAKING CAS H PAYMENTS FOR PURCHASE OF VARIOUS PIECES OF LAND. THE ABOVE PAYMENTS CONSISTE D OF PAYMENTS WHICH THE ASSESSEE HAD MADE FOR PURCHASE OF VARIOUS LANDS ON VARIOUS DATES AS NOTED BY LD. CIT(A) AT PAGE-11 OF HIS ORDER. FOR THE SAKE OF CONVENIENCE THE DATES AND VALUE OF VARIOUS LANDS PURCHASED BY ASSESSEE AS TAK EN OUT FROM LD. CIT(A)S ORDER ARE REPRODUCED HEREIN BELOW. SR. NO. DATE VALUE OF LAND PURCHASE 1. 05.05.2008 RS.13,65,000/-* 2. 23.05.2008 RS.21,87,500/-* 3. 04.06.2008 RS.12,50,00/-* 4. 08.07.2008 RS.68,00,000/-* TOTAL RS.1,16,02,500/-* WE FIND THAT THE HONBLE PUNJAB & HARAYANA HIGH COU RT IN THE CASE OF SH. GURDAS GARG VS. CII, 413, ITA NO.413/2014 VIDE ORDE R DATED 16.07.2015 HAD FRAMED THE FOLLOWING QUESTION OF LAW. (I) WHETHER THE TRIBUNAL RIGHTLY HELD THAT APPELLANT WA S NOT ENTITLED TO THE DEDUCTIONS IN RESPECT OF CASH PAYMENTS IN EXCESS OF RS.20,000/- MADE TO THE VENDORS FOR LAND IN VIEW OF SEC.40A OF THE I NCOME TAX ACT, 1961(FOR SHORT THE ACT). M.A. NO.55(ASR)/2016 I TA NOS.22 & 03 (ASR)/2015 ASST. YEAR: 2009-10 6 THE ABOVE QUESTION OF LAW HAS BEEN ANSWERED IN FAVO UR OF ASSESSEE BY HOLDING AS UNDER: RE: QUESTION NO.1 3. THE APPELLANT IS ENGAGED INTER ALIA IN TRADING IN PROPERTIES IN HIS INDIVIDUAL NAME. AS NOTED IN THE ASSESSMENT ORDER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE DETAILS OF THE CLOSING STOCK AS ON 31.03.2009 LONGWITH DETAILS OF SALES/PURCHASES WERE PLACED ON RECORD. THE CONSIDERATION, WHICH IN RESPECT OF EACH OF THE TRANSACTIONS WAS AD MITTEDLY IN EXCESS OF ?20,000/-, WAS PAID IN CASH. PAYMENT BY DEMAND DRAF T WAS MADE ONLY IN RESPECT OF ONE OF THE TRANSACTIONS. THESE PAYMENTS IN CASH WERE DISALLOWED BY THE ASSESSING OFFICER AND THE ORDER IN THIS REGARD WAS UPHELD BY THE TRIBUNAL. THE CIT(APPEALS) HAD ALLOWED THE DEDUCTIONS. SECTION 40A(3) OF THE ACT READS THUS:- 40A(3) WHERE THE ASSESSEE INCURS ANY EXPENDITURE I N RESPECT OF WHICH A PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON IN A DAY, OT HERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, EXCEEDS TWENTY THOUSAND RUPEES, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF SUCH EXPEN DITURE. IT IS IMPORTANT TO NOTE THE FOLLOWING PROVISO TO TH E SECTION:- PROVIDED THAT NO DISALLOWANCE SHALL BE MADE AND NO PAYMENT SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF BUSINESS OR PROFESSION UNDER SUB-SECTION(3) AND THIS SUB-SECTION WHERE A PAYMENT OR AGGREGATE OF PAYMENT MADE TO A P ERSON IN A DAY, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAY EE BANK DRAFT EXCEEDS TWENTY THOUSAND RUPEES, IN SUCH CASES AND UNDER SUCH CIRCU MSTANCES AS MAY BE PRESCRIBED, HAVING REGARD TO THE NATURE AND EXTENT OF BANKING FACILITI ES AVAILABLE, CONSIDERATIONS OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS. 4. IT IS IMPORTANT TO NOTE SOME OF THE FINDINGS OF FACT BY THE CIT (APPEALS). THE IDENTITY OF THE PAYEES I.E. THE VENDORS IN RESPECT OF THE LANDS PURCHASED BY THE APPELLANT, WAS ESTABLISHED. THE SALE DEEDS WERE PRO DUCED. THE GENUINENESS THEREOF WAS ACCEPTED. THE AMOUNT PAID IN RESPECT OF EACH OF THESE AGREEMENTS WAS CERTIFIED BY THE STAMP REGISTRATION AUTHORITY. THE CIT (APPEALS) HELD THE TRANSACTIONS TO BE GENUINE. ACCORDINGLY, THE CIT HE LD THAT THE BAR AGAINST THE GRANT OF DEDUCTIONS UNDER SECTION 40A(3) OF THE ACT WAS NOT ATTRACTED. 6. IT IS IMPORTANT TO NOTE THAT THE TRIBUNAL DID NOT U PSET THESE FINDINGS INCLUDING AS TO THE GENUINENESS AND THE CORRECTNESS OF THE TRANSACTIONS. IT IS ALSO IMPORTANT TO NOTE THAT THE TRIBUNAL NOTED THE CONTE NTION ON BEHALF OF THE APPELLANT THAT THERE WAS A BOOM IN THE REAL ESTATE MARKET; THAT IT WAS NECESSARY, THEREFORE, TO CONCLUDE THE TRANSACTIONS AT THE EARL IEST AND NOT TO POSTPONE THEM; THAT THE APPELLANT DID NOT KNOW THE VENDORS AND OBV IOUSLY THEREFORE, INSISTED FOR PAYMENT IN CASH AND THAT AS A RESULT THEREOF, PAYME NTS HAD TO BE MADE M.A. NO.55(ASR)/2016 I TA NOS.22 & 03 (ASR)/2015 ASST. YEAR: 2009-10 7 IMMEDIATELY TO SETTLE THE DEALS. THE TRIBUNAL DID N OT DOUBT THIS CASE. THE TRIBUNAL, HOWEVER, HELD THAT THE CLAIM FOR DEDUCTIO N WAS NOT SUSTAINABLE IN VIEW OF SECTION 40A(3) AS THE PAYMENTS WHICH WERE OVER ? 20,000/- WERE MADE IN CASH. THE TRIBUNAL, THEREFORE, DISALLOWED THE SAME ONLY O N A CONSTRUCTION OF SECTION 40A(3). THE TRIBUNAL RESTRICTED THE AMBIT OF THE P ROVISO TO THE CIRCUMSTANCES MENTIONED IN RULE 6DD OF THE INCOME TAX RULES, 1962 . WE FIND IT CONVENIENT TO LET THE ORDER OF THE TRIBUNAL SPEAK FOR ITSELF: - THERE IS NO INTENTION OF THE LEGISLATURE TO MAKE A LIST OF NATURE AND EXTENT OF BANKING FACILITIES AVAILABLE AND OTHER FACTORS TO BE DRAFTED BY THE AS SESSEE AT THEIR WHIMS AND FANCIES AND AS SUITS TO THE ASSESSEE. THEREFORE, RULES HAVE BEEN PRESCRIBED WHICH ARE RULE 6DD OF I.T. RULES, 1962 AND NOTHING BEYOND THAT. XXX XXX XXX THE LD. CIT(A) HAS NOT TAKEN THE SAID PROVISO IN TH E RIGHT SPIRIT AND HAS JUST ACCEPTED THE SUBMISSIONS AND ARGUMENTS MADE BY THE ASSESSEE AND HAS DELETED THE ADDITION, WHICH IS AGAINST THE FACTS OF THE CASE AND AGAINST THE PROVISIONS OF LAW . 6. RULE 6DD(J) IS NOT EXHAUSTIVE OF THE CIRCUMSTANCES I N WHICH THE PROVISO TO SECTION 40A(3) IS APPLICABLE. IT IS ONLY ILLUSTRATIVE. 7. THE RESPONDENT/ASSESSEE'S CASE IS SUPPORTED BY SEVERAL JUDGMENTS. THE RAJASTHAN HIGH COURT IN SMT HARSHILA CLIORDIA VS. INCOME TAX OFFICER, (2008) 2 98ITR 349 HELD AS UNDER:- 14. ABOUT THIS CLAUSE, MANY DOUBTS WERE RAISED AND ENQUIRIES WERE DIRECTED TO THE BOARD AS TO WHAT SHALL CONSTITUTE EXCEPTIONAL AND UNAVOIDABLE C IRCUMSTANCES WITHIN THE MEANING OF CLAUSE (J). THAT LED TO ISSUANCE OF CIRCULAR BY THE BOARD ON MA Y 31, 1977 ([1977] 108 ITR (ST.) 8), WHICH IS PUBLISHED IN TCUCMANN, VOL. 1, 1988 EDITION. SIGNIFICANTLY PARAGRAPH 4 OF THE AFORESAID CIRCULAR SHOWS VERY CLEARLY THAT ALL THE CIRCUMSTANCES IN WH ICH THE CONDITIONS LAID DOWN IN RULE 6DD(J) COULD BE APPLICABLE CANNOT BE SPELT OUT. HOWEVER, SOME OF THEM WHICH WILL SEEM TO MEET THE REQUIREMENTS OF THE SAID RULE ARE AS FOLLOWS: A. THE PURCHASER IS NEW TO THE SELLER; OR B. THE TRANSACTIONS ARE MADE AT A PLACE WHETHER EITHE R THE PURCHASER OR THE SELLER DOES NOT HAVE A BANK ACCOUNT; OR C. THE TRANSACTIONS AND PAYMENTS ARE MADE ON A BANK H OLIDAY; OR D. THE SELLER IS REFUSING TO ACCEPT THE PAUMENT BU WAY OF CROSSED CHEQUE/DRAFT AND THE PURCHASER'S BUSINESS INTEREST WOULD SU FFER DUE TO NON-AVAILAB ILITU O F GOODS OTHERWISE THAN FROM THIS PARTICULAR SELLER : OR E. THE SELLER, ACTING AS A COMMISSION AGENT, IS REQUI RED TO PAY CASH IN TURN TO PERSONS FROM WHOM HE HAS PURCHASE THE GOODS; OR F. SPECIFIC DISCOUNT IS GIVEN BY THE SELLER FOR PAYME NT TO BE MADE BY WAY OF CASH. 15. IT WAS FURTHER CLARIFIED IN PARAGRAPH 6 THAT TH E ABOVE CIRCUMSTANCES ARE NOT EXHAUSTIVE BUT ILLUSTRATIVE. M.A. NO.55(ASR)/2016 I TA NOS.22 & 03 (ASR)/2015 ASST. YEAR: 2009-10 8 16. THEREFORE, IN OUR OPINION, THE TRIBUNAL WAS CLEARL Y IN ERROR IN NOT TRAVELLING BEYOND THE CIRCUMSTANCES REFERRED TO IN PARAGRAPH 4 OF THE CIR CULAR AND. TO CONSIDER THE EXPLANATION SUBMITTED BY THE ASSESSEE ON ITS OWN MERIT. 17. SIGNIFICANTLY PARAGRAPH 5 REPRODUCED HEREINBELOW GIVES A CLEAR INDICATION THAT RULE 6DD TJL HAS TO BE LIBERALLU CONSTRUED AND ORDINARILY WHERE THE GENUINENESS OF THE TRANSACTION AND THE PAYMENT AND IDENTITY OF THE RECEIVER IS ESTABLISHED, THE REQUIR EMENT OF RULE 6DD(I) MUST BE DEEMED TO HAVE BEEN SATISFIED. PARAGRAPH 5 O F THE CIRCULAR READS AS UNDER [1977 / 108 ITR (ST.) 8 , 9: 5. IT CAN BE SAID THAT IT WOULD, GENERALLY, SATISFY TH E REQUIREMENTS OF RULE 6DD(J), IF A LETTER TO THE ABOVE EFFECT IS PRODUCED IN RESPECT O F EACH TRANSACTION FALLING WITHIN THE CATEGORIES LISTED ABOVE FROM THE SELLER GIVING FULL PARTICULARS OF HIS ADDRESS, SALES TAX NUMBER/PERMANENT ACCOUNT NUMBER, IF ANY, FOR THE PU RPOSES OF PROPER IDENTIFICATION TO ENABLE THE INCOME-TAX OFFICER TO SATISFY HIMSELF AB OUT THE GENUINENESS OF THE TRANSACTION. THE INCOME-TAX OFFICER WILL, HOWEVER, RECORD HIS SATISFACTION BEFORE ALLOWING THE BENEFIT OF RULE 6DD(J). 18. IT APPEARS THAT FULFILLMENT OF THE CONDITIONS OF P ARAGRAPH 5 OF THE CIRCULAR HAS CLEARLY ESCAPED THE ATTENTION OF THE TRIBUNAL. THE CIRCULAR CLEARLY INDICATES THAT ORDINARILY WHERE THE INCOME-TAX OFFICER IS SATISFIED ABOUT THE GENUINENESS OF THE TRANSACTION AND PAYMENT AND IDENTIFICATION OF THE CASH PAYMENT IS E STABLISHED, THE INCOME-TAX OFFICER SHALL RECORD HIS SATISFACTION ABOUT THE FULFILLMENT OF THE CONDITIONS FOR ALLOWING THE BENEFIT OF RULE 6DD(J). APPARENTLY, SECTION 40A(3)W AS INTENDED TO PENALIZE THE TAX EVADER AND NOT THE HONEST TRANSACTIONS AND THAT IS WHY AFTER FRAMING OF RULE 6DD (J), THE BOARD STEPPED IN BY ISSUING THE AFORESAID CIRCU LAR. 19. THIS CLARIFICATION, IN OUR OPINION, IS IN CONFO RMITY WITH THE PRINCIPLE ENUNCIATED BY THE SUPREME COURT IN CTO V. SWASTIK ROADWAYS AS NOTICED ABOVE. 20. IN THIS CASE, THERE IS NO DISPUTE ABOUT THE GEN UINENESS OF THE TRANSACTIONS AND THE PAYMENT AND IDENTITY OF THE RECEIVER ARE ESTABLISHE D. THEREFORE, THE CASE CLEARLY FELL WITHIN THE PARAMETERS OF PARAGRAPHS 4 AND 5 OF THE AFORESA ID CIRCULAR READ TOGETHER. 8. THE RESPONDENT'S CASE IS ALSO SUPPORTED BY THE J UDGMENT OF THE SUPREME COURT IN ATTAR SINGH GURMUKH SINGH VS. ITO, (1991) 4 SCC 385. AFTER REFERRING TO RULE 6DD, THE SUPREME COURT HELD:- 7. IN OUR OPINION, THERE IS LITTLE MERIT IN THIS C ONTENTION. SECTION 40-A(3) MUST NOT BE READ IN ISOLATION OR TO THE EXCLUSION OF RULE 6-DD. THE SECTION MUST BE READ ALONG WITH THE RULE. IF READ TOGETHER, IT WILL BE CLEAR THAT THE PROVISI ONS ARE NOT INTENDED TO RESTRICT THE BUSINESS ACTIVITIES. THERE IS NO RESTRICTION ON THE ASSESSEE IN HIS TRADING ACTIVITIES. SECTION 40-A (3) ONLY EMPOWERS THE ASSESSING OFFICER TO DISALLOW THE DEDUCTION CLAIMED AS EXPENDITURE IN RESPECT OF WHICH PAYMENT IS NOT MADE BY CROSSED CHE QUE OR CROSSED BANK DRAFT. THE PAYMENT BY CROSSED CHEQUE OR CROSSED BANK DRAFT IS INSISTED ON TO ENABLE THE ASSESSING AUTHORITY TO ASCERTAIN WHETHER THE PAYMENT WAS GENU INE OR WHETHER IT WAS OUT OF THE INCOME FROM DISCLOSED SOURCES. THE TERMS OF SECTION 40-A(3 ) ARE NOT ABSOLUTE. CONSIDERATION OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS ARE NOT EXCLUDED. THE GENUINE AND BONA FIDE TRANSACTIONS ARE NOT TAKEN OUT OF THE SWEEP OF THE SECTION. IT IS OPEN TO THE ASSESSEE TO FURNISH TO THE SATISFACTION OF THE ASSESSING OFFICE R THE CIRCUMSTANCES UNDER WHICH THE PAYMENT IN THE MANNER PRESCRIBED IN SECTION 40-A(3) WAS NOT PRACTICABLE OR WOULD HAVE CAUSED GENUINE DIFFICULTY TO THE PAYEE. IT IS ALSO OPEN TO THE ASSESSEE TO IDENTIFY THE PERSON WHO HAS RECEIVED THE CASH PAYMENT. RULE 6-DD PROVID ES THAT AN ASSESSEE CAN BE EXEMPTED FROM THE REQUIREMENT OF PAYMENT BY A CROSSED CHEQUE OR CROSSED BANK DRAFT IN THE CIRCUMSTANCES SPECIFIED UNDER THE RULE. IT WILL BE CLEAR FROM THE PROVISIONS OF SECTION 40- M.A. NO.55(ASR)/2016 I TA NOS.22 & 03 (ASR)/2015 ASST. YEAR: 2009-10 9 A(3) AND RULE 6-DD THAT THEY ARE INTENDED TO REGULA TE THE BUSINESS TRANSACTIONS AND TO PREVENT THE USE OF UNACCOUNTED MONEY OR REDUCE THE CHANCES TO USE BLACK MONEY FOR BUSINESS TRANSACTIONS. [SEE: MUDIAM OIL COMPANY V. /TO[( 1973) 92 ITR 519 (AP)] ]. IF THE PAYMENT IS MADE BY A CROSSED CHEQUE DRAWN ON A BANK OR A CROSSED BANK DRAFT THEN IT WILL BE EASIER TO ASCERTAIN, WHEN DEDUCTION IS CLAIMED, WHE THER THE PAYMENT WAS GENUINE AND WHETHER IT WAS OUT OF THE INCOME FROM DISCLOSED SOURCES. IN INTERPRETING A TAXING STATUTE THE COURT CANNOT BE OBLIVIOUS OF THE PROLIFERATION OF BLACK MONEY WH ICH IS UNDER CIRCULATION IN OUR COUNTRY. ANY RESTRAINT INTENDED TO CURB THE CHANCES AND OPPORTUN ITIES TO USE OR CREATE BLACK MONEY SHOULD NOT BE REGARDED AS CURTAILING THE FREEDOM OF TRADE OR BUSINESS, 9. AT THE COST OF REPETITION, THE TRIBUNAL HAS NOT DIS BELIEVED THE TRANSACTIONS OR THE GENUINENESS THEREOF. NOR HAS IT DISBELIEVED THE FACT OF PAYMENTS HAVING BEEN MADE. MORE IMPORTANT, THE REAS ONS FURNISHED BY THE APPELLANT FOR HAVING MADE THE CASH PAYMENTS, WH ICH WE HAVE ALREADY ADVERTED TO, HAVE NOT BEEN DISBELIEVED. IN OUR VIEW , ASSUMING THESE REASONS TO BE CORRECT, THEY CLEARLY MAKE OUT A CASE OF BUSINESS EXPEDIENCY. 10 IN THE CIRCUMSTANCES, THE ORDER OF THE TRIBUNAL IN THIS REGARD IS SET ASIDE. THE PAYMENTS CANNOT BE DISALLOWED UNDER SECT ION 40A(3) OF THE ACT. IN THE PRESENT CASE, WE FIND THAT ASSESSEE HAD FILE D COPIES OF SALE DEEDS OF THE ABOVE LANDS WITH THE ASSESSING OFFICER AND LD. CIT( A) AND AUTHORITIES BELOW DID NOT FIND ANY DISCREPANCIES IN THE ABOVE SAID SALE D EEDS. THE GENUINENESS OF THE TRANSACTIONS WAS NOT DOUBTED. THE AUTHORITIES BELOW HAS NOT DISBELIEVED THE FACT OF PAYMENTS HAVING BEEN MADE. THE IDENTITY OF THE P ERSONS TO WHOM PAYMENTS HAS BEEN MADE HAS BEEN ESTABLISHED AS THE SALE DEED S WERE REGISTERED WITH THE REVENUE AUTHORITIES. IN THE CASE LAW OF ATTAR SINGH GURMUKH SINGH VS. ITO (SUPRA) THE HONBLE SUPREME COURT OF INDIA HAS HELD THAT I N RESPECT OF TRADING ACTIVITIES NO DISALLOWANCE U/S 40A(3) WAS WARRANTED . THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF SH. GURDAS GARG H AS NOTED THE SAID ORDER OF HONBLE SUPREME COURT IN ITS ORDER. IN THE PRESENT CASE THE ASSESSEE WAS ENGAGED IN THE ACTIVITIES AS DEVELOPER OF LAND. THE REFORE, KEEPING IN VIEW THE ENTIRE FACTS AND RESPECTFULLY FOLLOWING THE JUDGMEN T OF HONBLE PUNJAB & HARYANA M.A. NO.55(ASR)/2016 I TA NOS.22 & 03 (ASR)/2015 ASST. YEAR: 2009-10 10 HIGH COURT IN THE CASE OF GURDAS GARG (SUPRA), WE H OLD THAT DISALLOWANCE U/S 40A(3) CANNOT BE MADE IN THE PRESENT CASE. 11. IN VIEW OF THE ABOVE GROUND NO.3 & 4 OF THE ASS ESSEE ARE ALLOWED WHEREAS GROUND NO.1 & 2 ARE DISMISSED AS NOT PRESSED. 12. IN NUTSHELL, THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED. 13. NOW COMING TO THE APPEAL FILED BY THE REVENUE, WE FIND THAT THE ASSESSEE FILED DETAIL SUBMISSIONS BEFORE THE LD. CIT(A). IT WAS SUBMITTED TO THE LD. CIT(A) THAT VOUCHERS HAD BEEN PREPARED BY ACCOUNTANT AND E NTERED INTO IN THE BOOKS OF ACCOUNTS IN BUNCHES LEADING TO THE IMPRESSION THAT AMOUNT EXCEEDED RS.20,000/- WHEREAS INDIVIDUAL PAYMENTS WERE NOT EX CEEDING RS.20,000/-. ON RECEIPT OF WRITTEN SUBMISSIONS FROM ASSESSEE THE LD . CIT(A) ASKED ASSESSING OFFICER TO PRODUCE THE ASSESSMENTS RECORDS FOR VERI FICATION OF CLAIM REGARDING PRODUCTION/NON PRODUCTION OF VOUCHERS/CASH PAYMENTS AND ALSO SUBMITTED A COPY OF WRITTEN SUBMISSIONS TO ASSESSING OFFICER FO R HIS COMMENTS. THE ASSESSING OFFICER IN HIS REMAND REPORT SUBMITTED TH AT ASSESSING OFFICER HAD SPECIFICALLY CONFRONTED THE CASH EXPENDITURE EXCEED ING RS.20,000/- EACH VIDE NOTICE DATED 19.07.2012 AND HAD MADE THE ADDITION I N THE ABSENCE OF ANY PLAUSIBLE REPLY FROM THE ASSESSEE. 14. IN HIS REJOINDER TO LD. CIT(A) ON THE REMAND RE PORT, THE ASSESSEE REITERATED HIS STAND THAT VOUCHERS ALONG WITH BOOKS OF ACCOUNT S WERE PRODUCED BEFORE THE M.A. NO.55(ASR)/2016 I TA NOS.22 & 03 (ASR)/2015 ASST. YEAR: 2009-10 11 ASSESSING OFFICER AND TO PROVE THAT ASSESSING OFFIC ER WAS PREJUDICED AGAINST THE ASSESSEE BY REPORTING WRONG FACTS, A PHOTO COPY OF THE ORDER SHEET FOR THE ASSESSMENT YEAR UNDER CONSIDERATION WAS ALSO SUBMIT TED. IT WAS CLAIMED THAT ORDER SHEET ENTRIES PROVED THAT ASSESSEE FULLY CO-O PERATED AT ASSESSMENT STAGE AND INFORMATION REQUIRED BY A.O WAS SUBMITTED. THES E FACTS HAVE BEEN NOTED DOWN BY THE LD. CIT(A) AT PAGE 16 & 17 OF HIS ORDER . THE LD. CIT(A) WHILE ALLOWING RELIEF TO THE ASSESSEE VIDE PARA 12 HAS AL SO MENTIONED THE FACT OF VERIFICATION OF ORDER SHEET ENTRIES DATED 14.08.201 2. WE FURTHER FIND THAT ASSESSING OFFICER DID NOT COMMENT ON THE QUESTION A S TO WHETHER THE INDIVIDUAL PAYMENTS WERE LESS THAN RS.20,000/- OR NOT BUT THE LD. CIT(A) IN HIS ORDER HAS HIMSELF VERIFIED THE VOUCHERS AND HAS HELD THAT NON E OF THE VOUCHERS EXCEEDED RS.20,000/-. IN HIS ORDER, HE HAS MENTIONED THE EXA MPLES OF TWO VOUCHERS OF RS.1,50,000/- AND RS.72,009/- DATED 16.04.2008 AND 15.04.2008 WHEREIN HE HAS MENTIONED THAT THE INDIVIDUAL PAYMENTS COMPRIS ED IN THESE TWO VOUCHERS WERE BELOW RS.20,000/-. FOR THE SAKE OF COMPLETENES S, WE REPRODUCE THE ORDER OF LD. CIT(A) AS CONTENDED IN PARA 12 OF HIS ORDER. 12. I HAVE EXAMINED THE ORDER SHEET ENTRIES IN THE ASSESSMENT RECORD AND IT IS SEEN THAT THERE IS AN ENTRY DATED 14.08.2012 WHEREI N THE AR HAD ATTENDED THE PROCEEDINGS AND PRODUCED BOOKS OF ACCOUNTS WHICH HA D BEEN TEST CHECKED. THE CASE HAD BEEN CONCLUDED ON 16.08.2012 WITHOUT RAISI NG ANY ISSUE REGARDING DISALLOWANCE UNDER SECTION 40A(3) OR POINTING OUT O F ANY VIOLATION THEREOF BY THE ASSESSEE. IN VIEW OF THIS EXAMINATION, IT BECOMES A PPARENT THAT THE AO'S CONTENTION IN THIS REGARD IS FACTUALLY INCORRECT. THE ASSESSEE DID PRODUCE BOOKS OF ACCOUNTS INCLUDING VOUCHERS WHICH WERE EXAMINED AND NO SHOW CAUSE NOTICE FOR MAKING IMPUGNED DISALLOWANCE UNDER SECTION 40A(3) HAD BEEN MADE. IT IS ALSO SEEN THAT THE ASSESSEE HAD TIME AND AGAIN CLAIMED THAT NO PAY MENTS IN EXCESS OF RS.20,000/- IN CASH HAD BEEN MADE AND IT WAS ONLY B UNCHING OF VARIOUS VOUCHERS THAT LED TO IMPRESSION OF SPENDING IN EXCESS OF RS. 20,000/- IN CASH IN A DAY. THE ASSESSING OFFICER WAS REQUIRED TO VERIFY THE CLAIM OF THE APPELLANT DURING THE APPELLATE PROCEEDINGS AND DESPITE OPPORTUNITY GIVEN IN THIS REGARD NO VERIFICATION REPORT HAD BEEN SUBMITTED. THE VOUCHERS PRODUCED BY THE ASSESSEE BEFORE THE M.A. NO.55(ASR)/2016 I TA NOS.22 & 03 (ASR)/2015 ASST. YEAR: 2009-10 12 UNDERSIGNED HAD BEEN EXAMINED AND IT BECOMES QUITE APPARENT THAT THE CONTENTION OF THE ASSESSEE IN THIS REGARD IS FACTUALLY CORRECT . FOR EG., VOUCHER NO.35 DATED 16.04.2008 CONTAINS THE PAYMENT MADE TO FOLLOWING P ERSONS AMOUNTING TO RS.1,50,000/- IN TOTAL. IT MEANS THAT PAYMENT OF RS .1,50,000/- DATED 16.04.2008 HAS BEEN TAKEN UP AS VIOLATION OF SECTION 40A(3) BY THE SPECIAL AUDITOR AS WELL AS BY THE ASSESSING OFFICER BUT IN EFFECT THIS PAYMENT OF RS. 1,50,000/- COMPRISES OF NINE DIFFERENT SEPARATE PAYMENTS EACH LESS THAN RS. 20,000/. SIMILARLY, VOUCHER NO.32 DATED 15.04.2008 CONTAINS THE PAYMENT MADE TO FOLLOWING PERSONS AMOUNTING TO RS.72009/- IN TOTAL. IT MEANS THAT PAY MENT OF RS.72009/- HAS BEEN TAKEN UP AS VIOLATION OF SECTION 40A(3) BY THE SPEC IAL AUDITOR AS WELL AS BY THE AO BUT IN EFFECT THIS PAYMENT COMPRISES OF FIVE DIFFER ENT SEPARATE PAYMENTS EACH LESS THAN RS.20,000/-. IN VIEW OF THE ABOVE ANALYSIS AND FACTS OF THE CASE, IT BECOMES APPARENT THAT DISALLOWANCE MADE DURING ASSESSMENT P ROCEEDINGS HAS BEEN MADE WITHOUT ANY ACTUAL VERIFICATION OF THE VOUCHERS AND EVEN DURING THE APPELLATE PROCEEDINGS, THE ASSESSING OFFICER DID NOT PROCEED TO VERIFY THE SAID VOUCHERS WITH REGARD TO THE CLAIM OF THE APPELLANT. THE CONTENTIO N OF THE ASSESSING OFFICER THAT BOOKS OF ACCOUNTS ALONGWITH THE VOUCHERS HAD NOT BE EN PRODUCED WAS ALSO FOUND INCORRECT. THE VOUCHERS PRODUCED DURING THE APPELLA TE PROCEEDINGS BEFORE THE UNDERSIGNED CLEARLY PROVES THAT THERE HAS NOT BEEN ANY VIOLATION OF SECTION 40A(3). IT IS ALSO SEEN THAT SAME ISSUE HAD BEEN POINTED OU T BY THE SPECIAL AUDITOR WITH RESPECT TO ASSESSMENT YEAR 2008-09 BUT NO DISALLOWA NCE UNDER SECTION 40A(3) HAD BEEN MADE BY THE SAME ASSESSING OFFICER. IT IS ONLY THAT FOR THE YEAR UNDER CONSIDERATION NO VERIFICATION HAD BEEN DONE BY THE ASSESSING OFFICER AND SPECIAL AUDITOR. IN THE CIRCUMSTANCES, THERE IS NO CASE FOR MAKING DISALLOWANCE UNDER SECTION 40A(3), WHICH IS DIRECTED TO BE DELETED. FROM THE ABOVE FACTS AND FINDINGS, WE DO NOT FIND A NY INFIRMITY IN THE ORDER OF LD. CIT(A). THE ADDITIONAL EVIDENCE WAS IN THE FORM OF VOUCHERS ONLY AND WHICH WERE FILED BEFORE ASSESSING OFFICER ALSO AS HAS BEE N HELD BY LD. CIT(A) WHILE EXAMINING THE ORDER SHEET ENTRY DATED 14.08.2012. T HEREFORE, GROUND NO.1 OF THE APPEAL IS DISMISSED. 15. NOW COMING TO GROUND NO.2 WHEREIN THE REVENUE H AS CHALLENGED THAT LD. CIT(A) HAS RESTRICTED THE DISALLOWANCE OF RS.1,22,2 3,250/- TO RS.1,16,02,500/- WITHOUT ANY BASIS. IN THIS RESPECT, WE FIND THAT TH E DISALLOWANCE OF RS.1,22,23,250/- CONSISTED OF VALUE OF LAND TO THE TUNE OF RS.1,16,02,500/- AND THE REST WERE ON ACCOUNT OF REGISTRATION CHARGES AN D OTHER CHARGES. THE LD. M.A. NO.55(ASR)/2016 I TA NOS.22 & 03 (ASR)/2015 ASST. YEAR: 2009-10 13 CIT(A) HAS NOTED THIS FACT IN HIS ORDER AT PAGE -8. FOR THE SAKE OF COMPLETENESS PARA 8 OF THE LD. CIT(A) ORDER IS REPRODUCED BELOW. 7. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE AR OF THE APPELLANT SUBMITTED HIS ARGUMENTS ON THE ISSUE AS UNDER:- 'IT IS SUBMITTED THAT THE ADDITION OF RS. 2,07,73,2 59/- IS DISCUSSED AT PAGES 3 TO 5 OF THE ASSESSMENT ORDER. THAT ADDITION INCLUDES THE FOLLOWING EXPENSES ON ACCOUNT OF LAND PURCHASE AND DEVELOPMENT. SR.NO. DATE ADDITION VALUE OF LAND PURCHASE 1. 05-05-2008 RS. 14,44,850/- RS.13,65,000/-* 2. 23-05-2008 RS.23,07,800/- RS.21,87,500/-* 3. 04-06-2008 RS.13,18,100/- RS.12,50,000/-* 4- 08-07-2008 RS.71,52,500/- RS.68,00,000/-* TOTAL RS. 1,22 ,23,250/- RS. 1,16,02,500/-* THE BALANCE AMOUNT PERTAINS REGISTRATION FEES AND O THER CHARGES ETC. THE COST OF STAMP PAPERS REGISTRATION FEES AND OTHER CH ARGES ETC. THE COST OF STAMP PAPWERS WAS DEPOSITED IN CASH IN STATE BANK OF INDI A. AS PER RULE 6DD(A)(I) OF INCOME TAX RULES, 1962, NO DISALLOWANCE OF SUCH AMO UNTS CAN BE MADE UNDER SECTION 40A(3) OF THE ACT. THE BALANCE AMOUNT PERTA INS TO COST OF REGISTRATION CHARGES AND OTHER MISCELLANEOUS EXPENSES AND ALL TH OSE PAYMENT ARE TO BE MADE IN CASH. MOREOVER, PAYMENT IN EACH CASE WAS LESS TH AN RS.20,000/-. THUS THE BALANCE PAYMENT RELATING TO COST OF LAND AND DEVELO PMENT TO BE CONSIDERED UNDER SECTION 40A(3) IS ONLY RS. 1,16,02,500/-. FROM THE ABOVE FACTS, WE FIND THAT THE DIFFERENCE O F RS.1,22,23,250/- AND RS.1,16,02,500/- IS ON ACCOUNT OF COSTS OF REGISTRA TION WHICH INCLUDED STAMP CHARGES AND OTHER MISCELLANEOUS EXPENSES, WHICH ARE SPECIFICALLY EXEMPT U/S 6DDA(I). THE LD. CIT(A) HAS ALSO NOTED THAT THE COS TS OF STAMP WAS DEPOSITED IN CASH IN STATE BANK OF INDIA, THEREFORE, AS PER RULE S 6DDA(I) SUCH PAYMENTS ARE EXEMPTED FROM THE PROVISIONS OF SEC.40A(3) OF THE A CT. MOREOVER, HE HAS MADE A FINDING OF FACT THAT OUT OF OTHER EXPENSES NON OF T HE EXPENSES EXCEEDED M.A. NO.55(ASR)/2016 I TA NOS.22 & 03 (ASR)/2015 ASST. YEAR: 2009-10 14 RS.20,000/-. IN VIEW OF THE ABOVE, GROUND NO.2 OF R EVENUE IS APPEAL IS ALSO DISMISSED. 16. IN NUTSHELL, THE MISCELLANEOUS APPLICATION IS A LLOWED AND THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED WHEREAS THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 .02.2017. SD/- SD/- (A.D. JAIN) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 21.02.2017. /PK/PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER